Diversification good or bad?

[Flowfollower]

How much time is required to manage your portfolio?

About 20 minutes a week managing trades eg adjusting stop losses
A few hours a week research, adding to and removing from watchlists
Maybe 20 minutes a week updating my trade log in excel
My planned holding time per position is months so turnover of stocks is low.

 

[deaddog]

Much diversification bashing.

I am in the process of diversifying as I am managing several accounts

I am looking at 50 equities positions across all accounts

Here is my reasoning.

1. I have a profitable edge

Then diversification should not make a difference

2. Opportunites to execute my edge are plentiful

Then diversification should not make a difference
​

3. I do not know which positions will be profitable

No one knows; it is more a case of managing your position than diversification.

4. My system is semi-automated so easy to manage

That does make diversification easier although not better

5. When people talk about how Mr XYZ has done well being concentrated, it is not mentioned that Mr XYZ is a survivor (maybe 1 in 100) and there are many multiples of these traders who did not survive and therefore we don't hear about.

Not really relevant as the same goes for all active managers. Can you beat the index or are you better off trading an index ETF?

6. My comissions are negligible

That possibly makes the trading cost a non factor. Depends on how often you trade. A trader who trades only a few stocks but trades often has higher costs than a long term swing trader.

7. Diversification allow one to move into the market slowly. This allows one to 'test the water' for good trading conditions without risking too much capital to find out.

I can have a single position and move into the market slowly, pyramid my position to a full position as the market moves in my favor.

8. Diversification can smooth out an equity curve
9. A smoothed equity curve allows one to keep to the strategy
10. A smoothed equity curve assists with compounding returns

The success of diversification is dependent on the above but seems to help reduce the gambling element to trading.

A smooth equity curve is nice to look at but my goal is protection of capital and superior returns. I feel that the more positions you hold the more you will tend towards average. If I was satisfied with average I would buy SPY.

I have 20 stocks over a 5 portfolios that I manage and feel I'm over diversified.

 

[Bree98]

For me diversification is really important. Putting all funds at one place is simply making your account prone to blowing up in a second. So its much better to distribute money in different avenues to keep your earning scope high.

 

[murray t turtle]

In a portfolio of stocks, how many stocks is considered over-diversification?

%%
500 may seem like to many;
but look how few, manage to beat SPY over a decade...…………………………………………..

 

[ironchef]

I have 20 stocks over a 5 portfolios that I manage and feel I'm over diversified.

I came to the same conclusion, narrowed down to about a dozen stocks and two brokerages. It is very difficult for me as a retail to manage more than a dozen, reading all the news, earning, read all of their financial statements, read up on all of their managements, products, SEC filings, drug developments, clinical trials.... And watch all their charts in real time.

%%
500 may seem like to many;
but look how few, manage to beat SPY over a decade...…………………………………………..

You are right Mr. turtle, It is very difficult to beat SPY if you own 500 stocks and my goal is to beat SPY/DIA/QQQ. Otherwise, why go through the trouble.

My friend specializes in trading options on one tech stock, for more than a decade and makes a good living doing it.

 

[murray t turtle]

I came to the same conclusion, narrowed down to about a dozen stocks and two brokerages. It is very difficult for me as a retail to manage more than a dozen, reading all the news, earning, read all of their financial statements, read up on all of their managements, products, SEC filings, drug developments, clinical trials.... And watch all their charts in real time.

You are right Mr. turtle, It is very difficult to beat SPY if you own 500 stocks and my goal is to beat SPY/DIA/QQQ. Otherwise, why go through the trouble.

%%
Amen + I cant really watch 500 stocks like I want to;
so that is why I trade SPY, UPRO...................................................................................................................................................................................................................................................When people buy junk like TSLA, junk silver,LOL. I do still study single stocks; but buy ETFs, ETFs x3.............................................................................................................

 

[deaddog]

I came to the same conclusion, narrowed down to about a dozen stocks and two brokerages. It is very difficult for me as a retail to manage more than a dozen, reading all the news, earning, read all of their financial statements, read up on all of their managements, products, SEC filings, drug developments, clinical trials.... And watch all their charts in real time.

I just watch the charts.

Someone else gets the news before I do so I'm at a disadvantage if I attempt to trade it.

In theory the chart tells me how other investors interpret the fundamentals.

 

[ironchef]

I just watch the charts.

Someone else gets the news before I do so I'm at a disadvantage if I attempt to trade it.

In theory the chart tells me how other investors interpret the fundamentals.

I hear you but I am not that good at reading charts.

Sometimes @dozu888's pro boys hide their trades very well and it is difficult to detect them just by looking at charts. As an example, Buffett bought billions of AAPL stocks over a few months' span and I was not able to detect when he bought even after the facts, just by looking at AAPL charts.

 

[deaddog]

I hear you but I am not that good at reading charts.

Sometimes @dozu888's pro boys hide their trades very well and it is difficult to detect them just by looking at charts. As an example, Buffett bought billions of AAPL stocks over a few months' span and I was not able to detect when he bought even after the facts, just by looking at AAPL charts.

I had no idea that Buffet was buying. All I know is that the trend is positive.

Not a stock I own so I haven't followed it.

 

[murray t turtle]

I just watch the charts.

Someone else gets the news before I do so I'm at a disadvantage if I attempt to trade it.

In theory the chart tells me how other investors interpret the fundamentals.

%%
Exactly;
charts are just price data with a picture. My old CPA preferred price data , in a list, on a page like taxes, so to each his own.